ANNUAL REPORT
2007

Financial Report

Year Ended 31 December 2007

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Austindo Resources Corporation N.L. and its Controlled Entities
A.B.N. 48 002 678 640


DIRECTORS' REPORT

Your Directors present their report on the consolidated entity (the "Group") consisting of Austindo Resources Corporation N.L. and the entities it controlled at the end of, or during, the year ended 31 December 2007.

DIRECTORS

The following persons were Directors of Austindo Resources Corporation N.L. during the financial year and up to the date of this report:

Mr. Bruce J. Watson (Non-Executive Chairman)
Mr. George S. Tahija
Mr. John C. Carlile (Managing Director)

Mr. John Carlile was appointed Managing Director effective 14 January 2008. Prior to this appointment Mr. Carlile was a Non-Executive Director of the Company.

Mr. Christopher P. Melloy was a Director from the beginning of the financial year until his resignation on 4 January 2008.

PRINCIPAL ACTIVITIES

During the year, the principal activity of Austindo Resources Corporation N.L. (the "Company") and its controlled entities was the exploration and development of the Cibaliung Gold Project in Banten Province, Indonesia. The Group also has Indonesian exploration interests in Pekalongan (Central Java), in Trenggalek (East Java), and in Aisasjur (Papua).

REVIEW OF OPERATIONS

Cibaliung Site Development and Erection of Gold Processing Plant

During February 2007, the Group resolved to put all major site construction works at the Cibaliung Gold Project (the "Project") on hold in order to conserve cash whilst funding arrangements were being finalised. This hold on expenditures remained in place until additional funding was secured by the Company during the last quarter of the 2007 financial year. During this period, work on the development of the decline continued in order to achieve access to mineralised ore at the earliest opportunity.

In early December 2007, a Letter of Intent was executed with P.T. Petrosea to undertake completion of the refurbishment work and remaining construction of the gold processing plant. P.T. Petrosea commenced mobilisation to site in January 2008. It is estimated that the refurbishment, construction and commissioning of the plant will be completed during the September 2008 quarter. Cullen Mining Services Pty Ltd has been engaged to act as Project Manager in respect of the construction and commissioning of the plant.

At the end of December 2007 the status of the site development and construction is summarised as follows:

• Site access roads and bridges have been essentially completed;
• Re-erection of the gold processing plant on site has recommenced;
• Installation of CIL tanks and thickener tank has been substantially completed;
• Installation of the cyanide mixing tanks has been substantially completed;
• SAG mill installation has commenced and bearing plates have been installed;
• Foundations for crusher have been substantially completed;
• All generating sets for the power plant have been installed in preparation for commissioning and connection;
• Elution circuit and gold room plant are on site ready for installation; and
• Tailings dam construction survey and earthworks have commenced.

The decline in the fair value of the derivatives is an unrealised loss and is attributable to the requirement to reflect the decline in fair value of cash flow derivatives that do not qualify for hedge accounting in the income statement. When gold production commences, the Group will be able to report higher revenues and earnings than would have been the case if these losses had not been recognised during the current financial year, effectively writing back the losses.

The capitalised costs of the Cibaliung Project's development of the first decline totaling $7,700,353 were written-off after the Group abandoned further development of this decline due to very poor ground conditions and the adoption of an alternative mining plan which included the development of a new decline access.

Also during the year the Group developed a revised Base Case Financial Model for the Cibaliung Project which incorporated the delay in the first gold pour date, and higher capital and operating costs. As a consequence, the Group was required under AASB136 Impairment of Assets to undertake asset impairment testing on the carrying value of the capitalised Cibaliung Project development expenditures and the capitalised Cibaliung exploration and evaluation expenditures. Based on the assessment of the recoverable amount of these assets, a write-down of their carrying value of $28,039,066 was required.

The sale of the Castlemaine Goldfield Limited shares generated a profit to the Group of $1,803,547.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

In the opinion of the Directors there were no significant changes in the state of affairs of the Group that occurred during the financial year not otherwise disclosed in this Review of Operations in this report or the consolidated financial statements.

MATTERS SUBSEQUENT TO END OF THE FINANCIAL YEAR

During January 2008, the Company announced the appointment of Mr. John Carlile as Managing Director effective 14 January 2008, and the resignation of Mr. Christopher Melloy as a Director effective 4 January 2008. The Company also appointed Mr. Cahyono Halim as Chief Financial Officer. Both Mr. Carlile and Mr. Halim are based in Jakarta.

On 31 January 2008 at a shareholders' general meeting, shareholders approved the conversion of Convertible Note debt of A$2 million, ANZ Bank Project Facility debt of US$13 million, and Bridging Loan debt of US$2.5 million into equity. The Company entered into separate Conversion Deeds with each of the lenders. On 6 March 2008 the Company allotted shares totaling 1,877,489,177 and options totaling 187,748,917 to effect the conversion of the above loan amounts from debt to equity.

Under the Conversion Deed with the Bridging Loan lenders it was agreed that the remaining Bridging Loans of US$2.5 million will be repayable upon the third anniversary of the conversion date, and that from the conversion date the interest rate on the remaining debt will be reduced from 15% to 10% per annum.

Under the Conversion Deed on the ANZ loans the Group also entered into a Deed of Amendment and Restatement to the Project Facility Agreement. Under this Deed of Amendment and Restatement an additional Cost Overrun Facility of US$5 million is available for the Project subject to the Group satisfying conditions precedent. Also under the Deed of Amendment and Restatement to the Project Facility Agreement, the Group is required to agree with the ANZ, prior to 30 March 2008, a gold hedging strategy to restructure its existing hedging commitments to reflect the Group's revised production schedule. Additionally the Company entered into a Deed of Charge with ANZ whereby the ANZ has a fixed and floating charge over all present and future property, assets and undertakings of the Company.

On 6 March 2008 the Company announced that it forecasted that it would require a further US$40 million to fund the Cibaliung Project until it is expected to become cashflow positive in the September 2009 quarter. As part of funding the required US$40 million, the Company announced in March 2008 a Renounceable Rights Issue to raise up to A$13.1 million, with the issue being partly underwritten to A$10.9 million by the ANZ.

Also on 6 March 2008 the Company announced that it had engaged Gryphon Partners to assist it in identifying a farm-in partner to fund the major portion of the remaining development expenditure through to positive cashflow for which the farm-in partner will earn a direct equity interest in the Cibaliung Project.

During March 2008 the Company announced that it would seek shareholder approval at its next Annual General Meeting to convert from a no liability ("N.L.") company to a company limited by shares, adopt a new Constitution, and a consolidation of its share capital on the basis of 50:1.

During March 2008 the Company announced the granting of further options under the Employees and Contractors Option Plan. The Company also announced the intention of granting of options to the directors, subject to shareholder approval.

Other than the matters discussed above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

Likely developments in the operations of the Group constituted by Austindo include the raising of additional funding or the securing of a farm-in investor to complete the development of the Cibaliung Gold Project and the commencement of gold production during 2008.

DIVIDENDS

No dividend has been declared, or paid, by the Company since the end of the previous financial year.

STATEMENT OF INTERESTS OF DIRECTORS

As at the date of this report, the interests of the Directors and their associates in the issued shares and options of the Company were:

INDEMNITIES AND INSURANCE OF DIRECTORS AND OFFICERS
In accordance with the Constitution of the Company, to the extent permitted by law, the Company indemnifies every director, officer and employee of the Company and each officer of a related body Corporate of the Company against any liability incurred by that person:

• in his or her capacity as a director, officer or employee of the Company; and
• to a person other than the Company or a related body corporate of the Company.

REMUNERATION REPORT

a. Principles used to determine the nature and amount of remuneration (audited)

The Company's policy in respect of senior executives is to remunerate them on the basis of their job function, taking into account their qualifications and experience. The level of remuneration is determined by the Executive Management in consultation with the Board taking into account the position and responsibilities for which each senior executive is charged.

While the Group's operations have been in the project development stage, the objective of the Board has been to minimise the number of senior executives it employs to maintain the total remuneration of such executives at a level that is commensurate with the resources of the Group and the level of activity undertaken.

From time to time, the Board considers the issue of options to employees and contractors as an additional incentive for them to generate shareholder wealth and for them to participate in the success of the Company. In the past, options have been priced at a premium above market at the time of grant.

Non-Executive Directors

The Chairman (non-executive) receives director's fees of $45,000 per annum. Other non-executive directors receive directors' fees of $30,000 per annum. The level of remuneration is based on an approximate time cost basis. The Board considers that this policy is appropriate while the Company is in a project development phase. Total remuneration for all non-executive directors was last voted on by shareholders at the 2005 Annual General Meeting and is not to exceed $250,000 per annum. No additional fees are paid for duties carried out in relation to the Audit Committee. Compulsory superannuation contributions of 9% are paid in relation to the directors fees paid to the Chairman. Compulsory superannuation contributions are not required in relation to the other non-executive directors.

Consulting fees were paid to Cubic Corporate Advisory Pty Limited, of which Mr. Bruce Watson is Managing Director. These consulting fees were for additional responsibilities Mr. Watson has undertaken outside of his direct Board and Committee responsibilities.

Consulting fees were also paid during the year to Mr. John Carlile. These consulting fees were for additional responsibilities Mr. Carlile has undertaken outside of his direct Board and Committee responsibilities.

Under the Employees and Contractors Option Plan of the Austindo Group established in 2001, the Board, subject to the Rules of the Plan and shareholder approval, may grant options to non-executive directors.

Directors' post employment benefits

The Company does not have a retirement benefit scheme for non-executive directors.

Executive directors and other key management personnel

Executive remuneration packages comprise a mix of the following components:

• Fixed remuneration;
• Long term incentives provided by the issuing of options under the Employees and Contractors Option Plan; and
• Post employment benefits.

The key management personnel of the Group include the Directors and the following executive officers, who include the 5 highest paid executives of the Group:

Remuneration details of Non-Executive Directors

a. Consulting fees of $370,800 were paid or payable to Cubic Corporate Advisory Pty Limited, of which Mr. Watson is Managing Director.
b. Consulting fees of $24,163 were paid or payable to Mr. Carlile.
c. Fees for provision of services as a director for Mr. Melloy are paid to Lion Manager Pty. Ltd.
d. Mr. Tahija has waived his entitlement to directors' fees, and no amounts were paid to Mr. Tahija for the provision of his services during the year.
e. The fair value of options at issue date was determined by the Directors having regard to an independent valuation completed by WHK Corporate Advisory Limited in accordance with AASB2 "". Share-based Payment

a. Consulting fees of $154,500 were paid or payable to Cubic Corporate Advisory Pty Limited, of which Mr. Watson is Managing Director.
b. Fees for provision of services as a director for Mr. Melloy are paid to Lion Manager Pty. Ltd.
c. Mr. Tahija has waived his entitlement to directors' fees, and no amounts were paid to Mr. Tahija for the provision of his services during the year.
d. The fair value of options at issue date was determined by the Directors having regard to an independent valuation completed by WHK Corporate Advisory Limited in accordance with AASB2 "". Share-based Payment

a. Former Managing Director resigned 31 July 2006.
b. Former General Manager Projects resigned 14 September 2006.
c. "Share-based Payment".

a. Former Managing Director resigned 31 July 2006.
b. Former General Manager Projects resigned 14 September 2006.
c. Hermani Soeprapto commenced employment 1 August 2006.
d. Brad Wake commenced employment 1 May 2006.
e. Former General Manager Exploration resigned 6 March 2006.
f. Former Site Project Manager resigned 8 August 2006.
g. Former Engineering Manager resigned 19 November 2006
h. "Share-based Payment"

The total number of options issued to subscribe for ordinary shares in the Company under the ECOP at the end of the financial year is 11,000,000. Each of these options entitles the option holder to one ordinary share of the Company at an exercise price of 7.0 cents per share, exercisable at any time from the date of vesting where applicable. (Number of potential ordinary shares 11,000,000)

Since year-end the Company has issued 116,000,000 options under the ECOP at an exercise price of 1.0 cent per share with an expiry date of 12 May 2013. Vesting of options is 50% upon achieving continuous gold production from the Cibaliung Project and 50% upon achieving positive cashflow from the Cibaliung Project. The exercise price was based on a 20% premium over the 10 day volume weighted average price up to 12 March 2008.

From this issue of ECOP 116,000,000 options, the following options were issued to the 5 highest remunerated executives or key management personnel:

It is also proposed that subject to shareholder approval at the Annual General Meeting that the Company will issue 64,000,000 options (not under the ECOP) at an exercise price of 1.0 cent per share with an expiry date of 12 May 2013. Vesting of options is 50% upon achieving continuous gold production from the Cibaliung Project and 50% upon achieving positive cashflow from the Cibaliung Project. The exercise price was based on a 20% premium over the 10 day volume weighted average price up to 12 March 2008. The breakdown of these proposed options will be as follows:

Under the Employment Agreement with Mr. Carlile, in the event that his employment is terminated without cause by the Company, prior to the expiry of the initial 12 month term (including where Mr. Carlile's employment ceases by reason of having identified a replacement Managing Director), then the options shall vest in full upon termination.

In the event that Mr. Carlile's employment is terminated with cause by the Company prior to the expiry of 12 months then a pro-rata proportion of the options shall vest for the period that Mr. Carlile was employed relative to the initial term of 12 months.

The total number of options issued to subscribe for ordinary shares in the Company under the ECOP at the date of this report is 127,000,000. Each option entitles the option holder to one ordinary share of the Company. (Number of potential ordinary shares 127,000,000)

The names of all persons who currently hold options granted under the Plan are entered in the Register of Options kept by the Company. The Register may be inspected free of charge. Particulars of options granted to Directors of the Company are detailed, under the heading, Statement of Interests of Directors.

No person entitled to exercise any option referred to above has or had, by virtue of the option, a right to participate in any share issue of any other body corporate. No shares have been issued during or since the end of the financial year by the exercising of an option.

Details of the Directors and other key management personnel who have option based remuneration are set out below: